Ask Question
17 June, 10:06

Van Frank Telecommunications has a patent on a cellular transmission process. The company has amortized the patent on a straight-line basis since 2009, when it was acquired at a cost of $15.3 million at the beginning of that year. Due to rapid technological advances in the industry, management decided that the patent would benefit the company over a total of six years rather than the nine-year life being used to amortize its cost. The decision was made at the end of 2013 (before adjusting and closing entries). Required:Prepare the appropriate adjusting entry for patent amortization in 2013 to reflect the revised estimate. (If no entry is required for an event, select "No journal entry required" in the first account field. Enter your answers in millions (i. e., 5,500,000 should be entered as 5.5)) Event General Journal Debit Credit1 Amortization Expense

+3
Answers (1)
  1. 17 June, 10:22
    0
    Accumulated Amortization (debit) $566,667

    Amortization expense (credit) $566,667

    Explanation:

    Amortization of Intangible Asset = Cost / Estimated Useful Life

    Amortization Charge for 2009

    Amortization of Intangible Asset = Cost / Estimated Useful Life

    = $15,300,000/9

    = $1,700,000

    Amortization Charge 2009 - 2012

    Amortization of Intangible Asset = Cost / Estimated Useful Life

    = $15,300,000/9

    = $1,700,000

    Total = $1,700,000 * 4 = $6,800,000

    Amortisation Charge in 2013

    Amortization of Intangible Asset = Cost / Estimated Useful Life

    = $15,300,000/9

    = $1,700,000

    Revised:

    Amortization of Intangible Asset = Cost - Previous Amortization / Remaining Useful Life

    = $15,300,000-$6,800,000-$1,700,000/6

    = $1,133,333

    Adjusting Journal:

    Note : Adjust as if Change happened at Beginning of the year

    Accumulated Amortization (debit) $566,667

    Amortization expense (credit) $566,667

    Adjustment = $1,700,000 - $1,133,333 = $566,667
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Van Frank Telecommunications has a patent on a cellular transmission process. The company has amortized the patent on a straight-line basis ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers